According to Central Statistics Office, in 2012, the majority of enterprises (90.7%) in the business economy in Ireland are micro enterprises . Given the size and importance of micro enterprises Microfinance Ireland was formed as part of the Government’s Action Plan for Jobs. The state-backed loan fund provides loans of €2,000 up to €25,000 to businesses employing ten people or fewer.
In the period since its inception in October 2012 till 30th June 2015 Microfinance Ireland has provided €9.303M value of loans to 606 micro-enterprises with a 50% approval rate.
59% of approvals were granted to start-ups (in business for less than 18 months) with an average loan size of €15.4K with the majority of loans going to businesses outside Dublin (79%). Only 6% of successful applicants were from Information and Communication sector. Local Enterprise Offices (formerly County and City Enterprise Boards) and Direct Applications are two main sources of referrals .While the LEOs is the primary referral partners of Microfinance, there has been a steady flow of applications directly from enterprises, both existing and new businesses, seeking credit. Of the applications received directly, 44% were approved.
Microfinance offers interest-bearing loans for generally three to five years. At present their interest rate is 8.8% APR fixed and is fixed for the term of the loan and loan repayments are also fixed. There are no fees or charges associated. There are no early redemption penalties for businesses wishing to pay off their loans early. As of April 2015, a business does not need credit refusal by commercial banks to be eligible to apply for a loan.
However, according to a review in 2015, Microfinance has admitted it has been overly ambitious in its initial targets. It is unable to match the activity level as forecasted originally. The reason is legacy debt with focus of businesses on repaying existing credit rather than taking new loans. An automatic bank referral system is also suggested along with better communication and marketing strategies.